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  The Global Crash: Saving What Can Still Be Saved

The Global Crash Saving What Can Still Be Saved

By SPIEGEL Staff

Part 3: 'Most of us Are in the Red'

Jack Ma is one of China's most successful Internet entrepreneurs. He runs a sort of clearinghouse for small and mid-sized companies on his Web site Alibaba. He's not optimistic. "It seems clear to me that there will be a sharp drop in exports to the United States," he says. "Winter is coming, and it could be a cold one."

Carlos Slim, a Mexican entrepreneur and multibillionaire, is the world's second-richest man. He owns banks and investment houses, insurance companies and mining operations, construction and automobile companies, a mobile phone business and restaurant chains. "This is going to last for a few years," he says, commenting laconically on the crisis. Slim believes that countries with large foreign currency and gold reserves will be better off than those that are intricately tied in to the US economy, like Mexico and Canada, which send most of their imports across the border. Part of the healing process, according to Slim, will be to strengthen domestic markets and reduce dependency on exports.

Brazil is in a comparatively strong position, because the bulk of its exports go to Europe, China and Latin America. It is an emerging economy with abundant natural resources, like China, India and Russia, and it is now blessed with a government that understands how to use the country's strengths to turn a profit. Gone are the days when Brazil was "not a serious country," as Charles de Gaulle is once believed to have said in the heat of the moment. If all goes well, Brazil will remain on track to become part of the elite circle of advanced industrialized nations.

Are things going well for Brazil? Because the major banks have not incurred significant debt with risky investments abroad, Brazil has remained more or less immune to the enormous upheaval in the financial markets. Nevertheless, the stock market in Sao Paulo has suffered, with the market index declining by 15 percent since early October. As in Russia, trading in Sao Paulo has been temporarily suspended several times. A handful of mid-sized and smaller banks are faltering. Domestic and international investors have taken refuge in the American currency. "The market for dollars has been swept clean," the owner of a currency exchange in Rio de Janeiro complains.

The Brazilian currency, the real, has lost one-third of its value within one month. Last week the government of President Lula da Silva sold, for the first time in five years, a portion of its foreign currency reserves of about $200 billion. Brazil is also drifting back into inflation, a nightmare from the 1980s. Imported goods, from cars to electronics, are becoming more expensive, and the price of bread is rising because wheat is imported at dollar prices. The Brazilian economy is expected to grow by 3.5 percent in 2009.

Agriculture, the crown jewel of Brazil's economic success, has been the hardest hit by the crisis. Grain silos stand, like imposing fortresses, along the road leading into Nova Mutum in the state of Matto Grosso, the center of the agricultural industry. But the shops in Nova Mutum are empty, and the few remaining employees spend their time washing pickup trucks, status symbols for farmers here. "Most of us are in the red," says Naildo da Silva Lopes, who, like all the farmers in the region, grows soybeans.

Nova Mutum's roughly 1,000 soybean farmers have borrowed against the coming harvest at a rate of 1.68 reals per dollar. The real's loss of value has increased the cost of their payments by one-third, while the price of a ton of fertilizer has increased from $650 to $800. Of the 1,000 farmers here, 800 are on the verge of bankruptcy, because the government is not helping them with bridge loans.

President Lula, as popular and successful as he is, has greatly miscalculated. "You should continue to consume," he told his fellow Brazilians only last Wednesday, noting that the center of the crisis is in the north, in the United States and Europe. But the shockwaves have also reached his country.

In the noblemen's palace in Moscow, a painting hangs on the wall behind Lebedev, the oligarch. It is one of 6,000 nautical motifs that Ivan Aivaszovsky painted in the 19th century. Lebedev's painting depicts a ship being lashed by the wind and tossed back and force by powerful waves. It is, of course, a symbol of the present, says Lebedev from behind his desk: despite the high waves, the ship is not sinking.

Then he goes into a conference room to meet with the directors of his companies. Key investment locations are marked with little red flags on a map of Russia hanging on the wall. Lebedev wants to know how his small empire could be affected by the world financial crisis and declining growth.

The head of NRK Oil reports that he is having a new, productive oil field developed along the Volga River, and he is optimistic because, as he says, "Vladimir Putin wants to help the industry, if necessary." In early July, Russia earned €830 million in daily oil and gas revenues. That number has since dropped to €660 million. The national budget has shown a surplus of three percent of GDP for the past five years, based on an average oil price of $70. If it drops below that figure, Russia will be forced to borrow money.

The head of the real estate division of the Lebedev holding company reports that municipalities are holding back government programs for affordable housing. The head of the tourism subsidiary notes that the travel market has declined by 20 percent, although the charter flights to vacation destinations in Lebedev's fleet are still fully booked. The Russian middle class apparently expects to be spared from the crisis.

Shortly before midnight, Lebedev is stuck in a traffic jam on a highway leading out of the city, as he drives to his country house near Moscow. According to the latest bad news, the media conglomerate RBK has announced layoffs, one-third of all receptions and parties in the city have been cancelled, and only one Porsche was sold in Moscow this week (instead of the average of eight).

This is the lunacy of luxury, says Lebedev. But, on a more serious note, he points out that crises have their good sides. If all goes well, he believes, capitalism will shed its skin and eventually reemerge in a more stable condition.

If all goes well, that is.

JENS GLÜSING, MATTHIAS SCHEPP, GERHARD SPÖRL, WIELAND WAGNER, BERNHARD ZAND

Translated from the German by Christopher Sultan